What Hong Kong's Housing Shortage Isn't Telling You

   Hong Kong is currently grappling with a severe housing crisis characterised by a chronic shortage of affordable housing options. The average price of real estate is exorbitant, with small "nano apartments'' reaching prices of almost 4 million dollars. Additionally, nearly half of the flats in the city have monthly rents that account for 122 percent of the average Hong Konger's monthly income. While factors such as high population density, limited land supply, and investment demand contribute to the crisis, there are underlying issues that are often overlooked.

Factors Contributing to the Crisis

Several factors contribute to the housing crisis in Hong Kong. For example, the proximity to the central business district (CBD) affects housing prices, with properties closer to the CBD commanding higher real estate values due to better job opportunities, amenities, and access to public transportation. Moreover, other factors such as high population density, limited land supply, and investment demand.

Solutions to Alleviate the Housing Crisis

Various solutions have been proposed to address the housing crisis in Hong Kong. These include rent control, increasing subsidies for low-income households, and decreasing property taxes for potential buyers. However, the most effective solution lies in rapidly increasing the housing supply. By directly addressing the issue of supply and demand, increasing the housing supply can balance the supply and demand ratio and lower costs. This would benefit low and middle-income households struggling to afford housing. However, there are obstacles that must be dealt with to make this solution possible while keeping costs low.

Accessibility of Increased Housing Supply

Increasing the housing supply alone does not guarantee accessibility for those most affected by the crisis. Developers have been accused of hoarding properties to generate strong sales responses, allowing them to raise prices and maximise profit. For example, in 2018, over 300 units in a finished residential building in Ho Man Tin remained unoccupied in order to artificially raise its market value. This shows the housing shortage is not just due to lack of supply but also the inevitable incentive for developers to prioritise profit over the needs of the population.

Non-Market Housing as a Solution

To ensure that the new supply of housing is accessible to those most affected by the shortage, non-market housing offers a potential solution. Non-market housing is owned by the government or non-profit entities such as charities, churches, or co-ops. Its aim is to provide affordable rents to low and moderate-income households below market rates. The rent paid by tenants goes back into the building's operating costs, making it more accessible. Over time, as rents fluctuate in other properties due to supply and demand, non-market housing maintains a relatively stable cost. 

Challenges and Potential

While non-market housing offers a promising solution, not everyone may have the opportunity to access it. Waitlists for government-funded non-market housing in Hong Kong are notoriously long, with an average wait time of 5.3 years. Vienna, Austria, serves as a successful example of this solution, where 60% of the population lives in non-market housing regardless of income. To address this, non-market housing needs to become a stronger competitor in Hong Kong. The abundance of non-market housing puts pressure on private landlords to compete, preventing them from inflating rents, so they maintain a more affordable rental market.

Hong Kong's housing crisis is a complex issue with far-reaching implications. While factors such as high population density, limited land supply, and investment demand contribute to the shortage of affordable housing, there are underlying challenges that need to be addressed. By considering solutions such as increasing the housing supply and promoting non-market housing, Hong Kong can work towards creating a more equitable and accessible housing market for its residents. It is crucial to ensure that affordable housing options are available to all, especially to low to middle-income households who tend to fall between the gaps. 

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